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Tariff Insider: June 26, 2019

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U.S. Announces Section 301 List 3 Exclusion Request Procedure

Ahead of G-20 Summit, Impact Of Trade Restrictions Beginning To Show

The whirlwind of tariff implementation continues to spin through the global economy. After months of shifting policy, including tariff hikes, new tariff plans, implementation delays, and even the threat of tariffs on goods from Mexico, now there’s a new policy announcement for companies seeking relief from tariffs dating back to fall of 2018.

On Monday, the Office of the United States Trade Representative (USTR) announced the procedure by which companies can request exemptions from the additional 25 percent tariffs placed on List 3 goods imported from China under section 301 of the Trade Act of 1974. Products from Section 301 List 3 have a total import value of approximately $200 billion.

To facilitate exclusion requests, the USTR will open a web portal here on June 30, 2019 at 12pm EST. Companies will have until September 30 of this year to submit their requests. Flexport’s Senior Customs Compliance Specialist Brian Chapman notes that “any exclusion granted would be effective going back to September 24, 2018 when the tariffs were originally put in place.” For reference, according to QuantGov, after the first year of tariffs on steel and aluminum imports, 51,345 requests were filed by 905 firms in 46 states and Puerto Rico, with 47 percent of the steel exclusion requests and 67 percent of aluminum exclusion requests approved, respectively.

Previously, anyone applying for exemptions on List 1 or List 2 did so through the regulations.gov web portal. The USTR has acknowledged the slow response to exemption requests to those lists, and is hiring additional staff to handle the anticipated influx of new requests for List 3. It should be noted that for List 3 exemptions, the USTR is asking for more detailed information on its forms.

G-20 Meets In Osaka As Data on Tariff Impact Emerges

As the G-20 summit gets underway in Japan later this week, the pressure over increasing trade restrictions and tariffs between the United States and China is cultivating major tension for the largest global economies. And, the knock-on effects of the still-escalating conflict are surfacing.

A WTO report released on Monday, covering October 2018 through May 2019, stated that “the trade coverage of new import-restrictive measures” is now “more than 3.5 times the average since May 2012,” when the WTO started measuring trade coverage figures.

Companies in the United States have now effectively passed the rubicon from looking at planned trade restrictions and speculating on the effects to having actual measurable data on the impact around the world. It’s not surprising that American imports to China have fallen about 27 percent compared to last year, as Bloomberg reports. But the geopolitical effects of the tariffs have expanded, with Japanese and South Korean imports to China down 16 and 18 percent, respectively.

Flexport’s Chief Economist Phil Levy has tracked the sometimes haphazard progress of trade negotiations in the past year. “In March, Secretary of State Mike Pompeo expressed optimism about striking a trade deal with Vietnam; now President Trump is threatening new tariffs. The administration went from trumpeting the new USMCA to threatening Mexico with immigration-related tariffs,” he says. “There is unlikely to be any cure unless Congress steps in to restrict some of the powers it delegated over the decades.”

According to Bloomberg, “WTO chief economist Robert Koopman sees evidence of the Trump trade wars rippling through supply chains and dragging on the world economy.” Most indicative of the current, ever-changing environment, Bloomberg also notes: “Almost every day brings fresh data on the economic impact.”

Stay tuned here for more updates on tariffs.

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